The federal government is preparing to remove the cap on the Petroleum Development Levy (PDL), allowing for an increase beyond the current Rs. 78 per liter on petrol and diesel. This adjustment is expected to generate approximately Rs. 194 billion in additional revenue for the fiscal year 2025-26.

This move would mark the highest petroleum levy in Pakistan's history, significantly surpassing previous collections. The increased levy aims to bridge revenue gaps within the Federal Board of Revenue (FBR) and support subsidies for the power sector and the growing electric vehicle industry.

Since July 2024, the PDL has risen from Rs. 60 to Rs. 78 per liter, generating over Rs. 1 trillion in tax revenue within the first 10 months of the current fiscal year. The government’s collection target for the fiscal year stands at over Rs. 1,100 billion, with Rs. 833.847 billion already accumulated between July 2024 and March 2025.

Additionally, the government has agreed with the International Monetary Fund (IMF) to remove the 10 percent cap on the Debt Service Surcharge (DSS) applied to electricity bills. This initiative is intended to reduce circular debt in Pakistan’s energy sector. A new law, expected to be introduced by June 2025, will enable this policy shift as part of broader financial sustainability efforts.

To ensure stability, Pakistan will continue quarterly tariff adjustments and monthly fuel cost revisions, helping to align base tariffs with actual revenue needs while preventing further debt accumulation. The Fiscal Year 2026 Circular Debt Management Plan will be presented to the cabinet by July 2025, reinforcing commitments to financial reforms without introducing new electricity or gas subsidies at the provincial level.

This strategy highlights the government’s ongoing efforts to balance economic challenges with sustainable revenue measures.